Dairy drinks 2023: Plant-based decline hits milk market

Talk about a deal to shake up the milk sector in 2023. Last month, Freshways Group acquired Müller’s Milk & More doorstep delivery service for an undisclosed sum.

It is, arguably, the milk category’s biggest story of the year. And the data for this year’s Top Products Survey has yielded yet more positive news for the group. Freshways has held on to its milk volumes – a pretty remarkable achievement in a market that is down 181.9 million litres.

For plant-based leader Alpro, the news is less positive. It was a key driver behind that category decline, as it felt the impact of cash-strapped shoppers turning away from pricier plant-based lines. Although some drop-off was inevitable, the sheer scale – volumes fell 22%, equating to 24.3 million fewer litres – is nonetheless a shock. It’s the biggest percentage loss in milk’s top 30.

Tom Kerr, head of category at Alpro owner Danone, admits “inflation and the cost of living have tempered recent growth rates”. Some consumers are no longer buying alternatives to milk as budgets tighten, he adds.

Plant-based milk alternative consumption

“In many households, plant-based products are only consumed by one person. So, naturally, when people look to save money from their weekly shop, it is plant-based items that are left on shelf,” Kerr explains.

That tallies with AHDB research in February, which revealed financial constraints had led to a year-on-year fall in alt dairy volumes of about 3% during Veganuary.

Still, at least Alpro has lived to tell the tale. This decline in interest has proven fatal for more than one brand this year. In March, Nestlé axed its pea protein-based Wunda brand due to poor sales. Just a week later, Innocent killed off its three dairy alternative drinks for the same reason.

The notable exception to this rule is Oatly. Britain’s second-biggest alt milk brand has grown volumes by 0.3%. That makes it the only top 10 brand to have grown volumes aside from Müller.

Oatly credits its performance to a recipe revamp for its Light, Semi and Whole Oat Drinks, coupled with the launch of a No Sugars variant. The NPD has driven interest despite an average price per litre that is 6.9% higher than Alpro, Oatly’s only meaningful plant-based rival.

Price has not necessarily hindered the performance of dairy brands, either. Take Freshways, which has added £18.4m on flat volumes. Average price per litre is up 21.1% – which Freshways MD Bali Nijjar puts down in part to a new supply contract with Iceland inside the M25.

Müller’s core milk has seen even steeper price rises – up 22.8% on average – and still managed to grow volumes 1.4%. Müller Milk & Ingredients Marketing director Helen Priestley hails the brand’s “strong like-for-like growth ahead of the market”, which was “further enhanced by the launch of the new ‘Good Stuff’ sub-brand earlier this year”.

The dairy giant also launched Barista Milk in June, which boasts an enhanced milk protein content (see box, below). Early reaction has been encouraging, Priestley says. “Most shoppers bought the milk as an incremental product, giving them the option to make frothy coffee shop-quality drinks at home”, Priestly adds.

Price a barrier for other milk brands

For other milk brands, price has been more of a barrier. Especially if they are already at the premium end of the market. Market leader Cravendale, for instance, has seen volumes fall 6.3% as prices rose 15.1%.

Catriona Mantle, head of milk at brand owner Arla, accepts that “shoppers are buying less milk”.

She calls on supermarkets “to disrupt the milk aisle to attract new shoppers into the added value milk category, as shoppers are spending just three to 11 seconds at fixture”.

Yoghurt drinks sales impacted

The impact of inflation can also be seen in sales of yoghurt drinks. Volumes are down 8.3% – driven by brands. They’ve shed 6.1 million litres as prices have risen 12.3%.

“Brands have the larger share and dominate the yoghurt space,” says Aastha Tripathi, NIQ senior analytics executive. “If brands are unable to offer consumers value for money, then the entire category will likely continue to struggle.”

In flavoured milk, the picture for brands – which account for 91% of market value – is more positive. They’ve maintained flat volumes, while seven of the top 10 names are in volume growth.

Crediton’s Arctic iced coffee brand is the standout performer in percentage terms. Its volumes are up 20.9%. The supplier credits its £1m ‘A Taste of Independence’ push in May and first-ever limited edition range in July.

When it comes to absolute gains, Starbucks has been the dominant force. It’s worth an extra £13.1m on a volume gain of 2.5 million litres. Adam Hacking, head of beverages at manufacturer Arla, says “growth has predominantly been driven by NPD, increasing distribution with key stockists, and expanding listings into other areas of store”.

The tactics may not have the shock value of the Freshways deal, but could prove just as effective.